Do you need a back to school budget? I always say yes but it’s up you what you want to do with your life. I don’t think schools offer debt management degrees so either you buckle down or risk more debt than you can handle after school. I get so many emails from students wanting to know how they can budget their money when they go to school. Budgeting doesn’t need to be stressful as it is fairly simple. Now is the time to prepare your finances if you are University or College bound. Some people make a budget look harder than it actually is but for some just starting a budget is the most terrifying part of the process. A budget can alter someone’s life that is used to spending money and not being accountable for it. You may even need to learn how to say no I’m on a budget if you’re the type that gives in easily, especially to your friends or a shopping addiction. It’s an important time in a student’s life and this is one area many graduates say they wish they had prepared better for. Spending money frivolously while you are in school will come back to haunt you so get a grip and start a budget.
Step 1- Setting Goals
First things first… I will talk as if it was me going to school again. I’ve just graduated this year for the second time but the first time in Canada so I’ve learned along the way. So I’m sitting with my piece of paper and a pen so I can write my goals. You should set long-term, short-term and in-between term goals.
- How long is my course?
- How many hours a week am I in school?
- What I hope to do when I am finished my education?
- What are the odds of me getting a job in the area or would I have to move to get an apartment for work? You see living at home after school is helpful as most parents will help you to back on your feet to pay off some of the debt. In my case that didn’t happen so I rented a room.
- I also want to know whether I want to work part-time or full-time while I am in school.
- How many hours will I need to devote to homework,research,group work?
- Do I want to start saving for a down-payment to buy my own home after I’m done school?
- Do I want to buy a car?
- When do I start investing in my future?
- Do I want to go on any trips, concerts after school or during March Break?
- How much money will all this cost? How will I go about saving for it so I don’t go into debt?
- Do I really need a credit card?
Remember these are just random thoughts to get the brain juices flowing. You can expand on them later. It’s important to think about your life, this is the time.
Step 2- Where the money is coming from?
How much money will I have to spend every month while in school? Most people make simple budgeting mistakes that you can avoid if you prepare your finances. Money depends on your funding sources. Most students get money from various places such as
- Ontario Student Assistance Program (OSAP)
- Summer Job
- Parents, Relatives
- Education Funds
- Bursary, Grant
- Gifts
- Part-time or Full-time job
- A Co-op Term or a Work term most times will pay but you won’t know what you will get paid until you are hired by a company.
Most students are in school for about 10 months in Canada so your budget will likely be structured for that time period. If you do not live on campus you may have to sign a 12 month lease and that may or may not allow you to sublet. I always liked to think 12 months that way it was a cushion for me in case of an emergency. You can easily use 10 months as your budget it’s up to you.
Example: So take all the money you will receive to go to school for the year.
- OSAP-$5,000
- Summer Job $3,000
- Parents, Relatives $1,000
- Bursary ,Grant $5,000
- Gifts $1,000
- Part time or full-time Job (Net income-income after taxes paid) $250 week x 52 weeks per year= $13,000 year or for 10 months per year $250 week x 43.33 weeks is 52 weeks/12 months x10 months=43.33 weeks x $250 = $10,832.50 year
So add it all up (I’m using working part-time for 12 months with a made up income)
Yearly Net Income-$5,000+$3,000+$1,000+$5,000+$1,000+$13,000=$28,000 net for 12 months of the school year
So you have approximately $28,000 for the entire year to pay for everything you need to pay including school.
Step 3- What are my fixed and variable expenses, categories and how much will it cost?
Education Expenses:
- Cost of your education $5,000 Total All Academic Terms
- Books for both semesters $1,000 total *Tip-Search online or at your school campus on-line forums or boards for students selling second-hand books. For the most part new editions have small changes or you may find just what are you are looking for. I sold all my books on kijiji for about half of what I paid. Try not to mark up your books to get best return. Sell them as soon as you no longer need them. Buy them as soon as you know what you need.
- Tools for school, school supplies $200 total – Check local flyers and deals online for the best back to school supplies deals in your area.
Total $5,000+1,000+$200=$6200 for the year (I could be missing something but you get the idea in this example) Any education related expenses you will have in this category.
Yearly Net Income $28,000-$6200 (Education expenses)=$21,800 left for your fixed and variable expenses for the 12 months. Remember I am using 12 months and if you will only be in school for 10 months do the math according to the length of time you will need.
Monthly Net Income- $21,800/12 months =$1816.66 (keep in mind if you are terminated from your job,laid off, or quit you will have big problems if you don’t have a PLAN B as a chunk of your money is coming from your part-time job here) If you don’t plan on working your OSAP loan may be higher unless you have enough saved for your education and living expenses. Don’t always assume you will get OSAP either. If your parents make a certain amount of money you may be denied. It’s best to enquire about this well before school. Some students turn to financial institutions for a line of credit for students as well. You might think $1816.66 is alot of money but wait and see how fast it will disappear. I’m also using higher than minimum wage net income so students depending on where they work and their budget may have less or more to work with.
Now you know you have approximately $1816.66 per month to spend, so what do you spend it on? You need to break your categories into Fixed expenses and Variable expenses.
Tip: Hook up with a Student Price Card (SPC) for $11.00 for 2012-2013 for optimal savings at many shops in the mall and restaurants. It’s worth the money if you know you will be spending at these shops.
Tip: If you go to the movies with your friends hook up with a SCENE card to get points each time you go. You can then use your points towards free movies, snacks and discounts on Tuesday Tickets.
Tip: Shoppers Optimum Card allows you to save up points each time you shop. These points can add up significantly with redemption periods all year-long.
Fixed expenses are expenses that don’t change from period to period like your housing, insurance, car payment and cable bill. You know the exact amount will be relatively the same every month. These are also expenses you have to pay for each month but also can cut if needed such as cable.
Variable expenses are expenses that may go up and down depending on your spending habits, usage, inflation and cost. Examples would be utilities, groceries, gas, eating out, entertainment, gifts, health and beauty. These are expenses or areas you can make cuts to if you can’t balance your budget.
- Housing-Will you be renting a house, apartment, room or living on campus? This will be one of your biggest expenses. I’ve seen rent for a 1 bedroom apt at $800 plus in our area. If you rent a room or share a place it may run you $300-$450 or more per month plus a part of the utilities. A good place to look is on Kijiji for the city your school is in, under real estate or school forums or housing depts. Pricing will differ everywhere in Canada.
- Food- Budget for 1. Are you splitting food with roommates? Is a meal plan included with your on campus living? Do you pay as you go in the cafeteria?
- Transportation-Bus, Go train, parking, gas, vehicle sticker, car insurance, licence renewal, vehicle maintenance.
- Clothes-School clothes, seasonal clothes, work clothes, shoes and accessories. How much do you need or can you afford?
- Entertainment-Pubs,concerts, eating out with your friends, coffee, smoking etc-(you need to think of everything you would do and put in this category)
- Utilities- Gas,hydro,water- You may owe a part of this if you have shared housing or it may be included with your rent. Ask your landlord for details.
- Renters Insurance- Are you covered under your parents insurance plan when you are away at College or University? Take pictures of everything you own and keep receipts. In the event that something should happen your insurance company may need this information for reimbursement.
- Communications- Internet,cable,cell phone,home phone
- Emergency Savings- Everyone needs to save even you! Saving as little as $5-$10 a month is better than $0. You will be happy you did.
- Health and Beauty- Self explanatory
- Dental, Prescriptions and Insurance- Who will be paying for this? Are you covered under your parents work plans or do you need to get your own student coverage through your education system?
- Gifts- Will you be buying gifts throughout the year for friends, achievements, birthday, Christmas etc
- Debt Repayment-Credit card or other debt. Do you owe money on your credit card or other debts?
- Miscellaneous- Items that pop up that are not categorized that are not an emergency
- Investments- If you already invest money you need to budget for it. ie: Adult student returning to school like I did. I was investing in my RRSP with money I made from working.
Step 4- Putting it all together! Know where your money is going, balancing the budget and where to cut back
Add up all the fixed items or items you have to pay for and minus them from your net income. Whatever money you have left you now have to divide that money to your variable expenses. You need to balance your budget and if you can’t you need to make cuts to your budget. Once you have all your totals you can total your expenses and minus that from your monthly net income. If it doesn’t balance you need to make changes or make more money. So if that means no cell or no internet then so be it. If you spend more than you earn you will go into debt. Believe me you don’t want that if you can help it.
Note: You need to factor in expenses even if they are one-off payments per year such as vehicle sticker. If your birthday is in January and you need to get your sticker then for $75.00 budget this expense all year and save for it. So $75/12=$6.25 per month. That way when you need to come up with the cash you have it in your savings account. We call this our projected expenses and that’s all we keep in this bank account. Our emergency savings sits in another account so we don’t mess them up. It’s up to you how you want to keep your accounts but we found keeping them separate was super helpful and still do this today. If you want to follow our budgeting series on how we designed our budget I recommend starting here. You will learn everything we did and still do today.
You can also check out all my free downloadable tools here such as
- Basic Budget Sheet
- Overtime Tracking Sheet
- Grocery Shopping List
- Pantry List
- Freezer Inventory List
- Weekly Menu Planning
If you want to keep your grocery budget in check you can come back weekly, save your receipts and post your shop with us here at Canadian Budget Binder with our weekly Grocery Game Challenge. Once a month one fan WINS a prize but most of all it motivates us to keep on track with our grocery budget. Some people ask me how much should my grocery budget be but that’s up to you to decide. Once you plug in the figures into your budget you will have a better understanding of how much you can spend. Use common sense when deciding on where to make changes in the budget if you need to.
If you buy coffee and a bagel every day at Tim Hortons can you not make coffee at home and buy bagels at the grocery store? I did a price comparison of 2 co-workers one who bought coffee and ate out for lunch everyday and the other who brought it. The results were astonishing and it’s no different if you are a student. If you don’t look out for yourself no one will.
My final advice would be to review your student budget monthly to see if you are on track or if you need to make any adjustments to your budget. Life always changes and so does the budget.
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